Feb. 26 (Bloomberg) -- Lowe’s Cos., the second-largest U.S.
home-improvement chain, posted a 6.3 percent profit gain as the
housing rebound spurred renovation spending. The company also
announced a plan to buy back $5 billion in shares.

Fourth-quarter net income increased to $306 million, or 29
cents a share, from $288 million, or 26 cents, a year earlier,
the Mooresville, North Carolina-based retailer said today in a
statement. Excluding some items, profit was 31 cents a share in
the period, which ended Jan. 31. That matched the average of 24
analysts’ estimates compiled by Bloomberg.

Chief Executive Officer Robert Niblock has added workers at
Lowe’s busiest times to take advantage of a surge in home
renovations, fueled by rising property values and increasing
purchases of new homes. Sales at locations open at least a year
rose 4.8 percent for the year and 3.9 percent in the fourth
quarter.

Lowe’s rose 5.4 percent to $50.72 at the close in New York.
The Standard & Poor’s 500 Index traded above its record closing
level as an unexpected increase in new-home sales bolstered
optimism in the economy.

Sales Gain

Profit this year will be about $2.60 a share, Lowe’s said
today. Analysts had projected $2.64 on average. The retailer
also forecast same-store sales would gain 4 percent. While the
company described the outlook as cautious, since the fiscal year
ended in February 2006, that growth would only be surpassed by
last year’s 4.8 percent increase.

“Some of the recent housing and jobs data has softened a
little bit, but we still think the consumer is going to be there
and 2014 is going to be a great year,” Niblock said in an
interview. “It made more sense to come out slightly more
cautious with our guidance and then deliver numbers above.”

Home Depot, the largest U.S. home-renovations chain, said
yesterday that it expected the housing recovery to continue
boosting its results. Same-store sales will increase 4.6 percent
in the current fiscal year, the Atlanta-based company said.
Since the fiscal year ended January 2005, that would only be
bested by last year’s 6.8 percent gain. The chain’s fourth-quarter profit also topped analysts’ estimates, marking six
straight years of exceeding or meeting projections.

Share Buyback

Lowe’s also said today that its board approved the $5
billion share repurchase, which comes in addition to the $1.3
billion remaining on its current authorization.

Like Home Depot, Lowe’s growth strategy has shifted to
boosting sales at current stores rather than opening new
locations. The one recent exception came last year, when Lowe’s
bought the majority of Orchard Supply Hardware Stores Corp.’s
assets, including 72 locations, out of bankruptcy for about $205
million. Lowe’s said today it plans to add about 15 home-improvement and five hardware stores in its current fiscal year.

Lowe’s has been revamping its product lines to remove items
that were less profitable or took longer to sell. Those moves
should continue to benefit the company as the economy improves,
Keith Hughes, an analyst at SunTrust Banks Inc. in Atlanta, said
in a phone interview before the results were released.

The chain should receive another boost because it focuses
more on premium goods than Home Depot and shoppers often trade
up to higher-priced items as consumer confidence increases and
incomes rise, he said. In the fourth quarter, same-store sales
gains were driven by purchases above $500 that rose 8.9 percent,
Niblock said. That more than doubled the total gain.

“Lowe’s has played at the high end, and Home Depot has
played at the low end,” Hughes said. “That has helped Home
Depot, but that advantage should flip to Lowe’s.”